Good things sometimes come out of bad situations. The proliferation of pop-up shops, for example, was a direct result of the Great Recession. Desperate for a steady source of income at a time when retail vacancies were high, commercial landlords became more receptive to alternative leasing structures. Instead of insisting on one or two-year leases, owners agreed to short-term leases. With a much lower initial investment, new retailers could test the local market without risking their entire life savings. The new arrangement also gave seasonal sellers and commercial contractors the ability to capitalize on holiday sales. Now that the model has been established, there is no going back.
Pop-Up Shop Construction
Now a real estate trend, a growing number of developers are investing in pop-up stores. With the help of commercial contractors, they build retail spaces for rent or sale. The main benefit for both parties is that pop-up shops are merely temporary structures that are much cheaper to build than brick-and-mortar stores. They can also be completed much faster, which makes them an attractive volume business for experienced commercial contractors. With that said, pop-up stores are not a risk-free investment. Here are a few things owners should consider.
Lease or License
Before moving on to the next project, a landlord must decide what type of agreement is best for the space. Generally speaking, a lease gives the tenant exclusive use of a space in exchange for rent, while a license gives the tenant permission to do something specific on the owner’s property. The biggest difference between the two is that a lease gives the tenant an interest in the property, but a license does not. As such, a lease is not revocable, while a license can be revoked at any time. For the landlord who is interested in a longer-term pop-up shop rental, a lease is definitely the way to go.
No matter the duration of the lease, pop-up shop landlords must make certain there is sufficient insurance coverage. If there is not, an on-premise accident could leave them open to a liability lawsuit from either the tenant or an injured customer.
Just like a regular lease, it is imperative that landlords clearly delineate in the lease which party is responsible for providing and paying for utilities. Owners should also address maintenance issues, such as appliance repair, with the tenant before the lease is signed.
Commercial contractors and landlords can make a handsome profit when they build and rent pop-up shops on their own terms.